TOKYO -- Japan's collaboration with the U.K. to develop a new air-to-air missile aims partly to breathe new life into a stagnant defense industry that has seen little luck capitalizing on newfound access to overseas markets.

The country's Acquisition, Technology and Logistics Agency estimates Japan's defense market at 1.8 trillion yen ($16.1 billion), about the same size as the home appliance or shipbuilding markets. Defense spans a wide array of products, from ships and jets to ammunition and fuel. Major players include Mitsubishi Heavy Industries and Kawasaki Heavy Industries as well as electronics companies such as Mitsubishi Electric and NEC.

Japan adopted principles regarding arms exports in the 1960s that effectively barred overseas transfers of defense equipment as well as international collaboration on development in the field. As a result, the Japanese Self-Defense Forces have long been the industry's sole customer. The large numbers of small-volume orders from the SDF have not provided defense contractors with a recipe for profitability.

But Tokyo established new rules governing defense equipment transfers in 2014, allowing exports and joint development if they contribute to Japan's security. The shift aims to broaden the industry's potential customer base and let it share the growing cost of developing increasingly sophisticated technology.

Yet efforts to do business abroad have met with little success. Mitsubishi Heavy and Kawasaki Heavy, with Tokyo's support, vied for a contract to supply Australia with new submarines but lost out to France in April 2016. Japan has held regular talks with India on a proposed sale of Japanese-made US-2 amphibious search-and-rescue aircraft, but no deal has been reached.

The industry remains domestically oriented in many ways. For example, Mitsubishi Heavy and Kawasaki Heavy customarily produce one submarine a year between them. With more than 1,000 subcontractors operating on this schedule, accelerating the pace with an eye toward overseas expansion would be no simple task.

The relatively small contribution of defense-related operations to the earnings of Japanese companies makes these businesses still less inclined to look abroad. The field accounts for just 6% of total sales at even top defense contractor Mitsubishi Heavy, 13% at Kawasaki Heavy and a mere 2% at Mitsubishi Electric. By comparison, the industry produces nearly 90% of sales at Lockheed Martin of the U.S. and Britain's BAE Systems.

The SDF provides a steady stream of orders, but growing imports from the U.S. make substantial growth unlikely. If Japanese companies become unable to retain engineers who cannot be readily transferred to other fields, they will have little motivation to maintain a business that offers such low profit margins. The missile development project with the U.K. might keep companies in the industry that otherwise would drop out.

"There was a limit to what a single business could do on its own," a representative of a major defense-related company said. "We're grateful that the government has our back."

However, missile development is just one step in a process that is likely to involve tough negotiations. Lockheed Martin and American peer Raytheon are reportedly working on their own air-to-air missiles. No guarantees exist that the Japan-U.K. weapon will offer superior performance, or be readily adopted by other countries.